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SA bushfire inquiry boosts ICA reform case

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SA’s independent inquiry into last summer’s bushfires has added momentum to the Insurance Council of Australia’s (ICA) national campaign to ditch taxes that act as a disincentive against taking out cover.

The inquiry report recommends considering removing stamp duty from home insurance to encourage a wider section of the community to purchase policies, and proposes state government agencies share risk modelling data with ICA.

“The report is another voice in the call for removing unfair and inequitable taxes on insurance,” CEO Rob Whelan said. “Stamp duties make insurance more expensive and lead to underinsurance and non-insurance.”

The taxes are especially damaging at present as communities and businesses struggle with the impact of the bushfires, COVID-19 and the recession, he says.

ICA has further pushed the case for removal of taxes in an extensive submission to the Royal Commission into National Natural Disaster Arrangements, due to deliver its final report by the end of next month.

“The economic case for the abolition of insurance-based state taxes and levies is widely accepted, having been canvassed in numerous federal, state and territory government reviews,” Mr Whelan said.

The SA report, which makes 15 recommendations, says a significant proportion of properties and businesses were either uninsured or underinsured during the last bushfire season, for reasons that have not been determined.

“Stamp duty concessions on insurance could be provided to reduce costs,” it says. “Insurance must be promoted to support resilience and recovery.”

The inquiry also calls for better information sharing and Australian standards for property resilience, which would allow risk-reduction work to be reflected in premium levels.

“In the absence of agreed standards property owners do not have definitive guidance on how to decrease the risk of their property being destroyed by bushfire,” it says. “The insurance industry also has no standards against which to scale premiums.”

The SA Government has committed $48.5 million in an immediate response to the report and says it will further respond to the recommendations by the end of September.

ICA, in its bushfires royal commission submission, says Australia needs to adopt a systematic approach to disaster risk reduction consisting of increased public and private mitigation, improved building quality and standards and improved land use planning.

It proposes Federal and State governments establish a data sharing framework, working with the Office of the Australian Information Commission and others to address any Privacy Act impediments.

ICA sets out the case for governments to view mitigation as a “nation-building” exercise requiring a different approach compared to infrastructure investments where a financial return is expected.

The submission suggests building inspection programs, that could be voluntary or mandatory and provided with some form of subsidisation from governments.

On land use planning, ICA says state planning and environment courts should not be able to overturn local government decisions in ways that enable building developments on flood-prone land without adequate disaster mitigation.

It also suggests governments consider creative solutions where land, as a result of poor planning, is highly exposed to natural hazards, such as flooding or coastal inundation.

“For example, if a home built on highly exposed flood prone land is destroyed in a flood, governments should consider a land swap for that resident to a nearby location outside of the flood risk,” it says.